Berlin, Britain emerge as top property hubs in EU

Dubai - If the UK decides to leave the EU, it could open doors to further investment into Berlin

Each year, usually in March or April, the UK Chancellor of the Exchequer presents his budget statement to members of Parliament in the House of Commons. Among all the changes, what did the budget mean for property investors?

While there were no overwhelmingly positive announcements for property investors in the spring budget, there was also nothing to dampen confidence in the continuing viability of the UK property market. Supporting home ownership continues to be a focus for the current government, while other measures provide a mixture of help and hindrance to residential construction.

Last month's announcement confirmed measures laid out in the autumn statement 2015 that will do just that through a new Lifetime ISA scheme and the continuation of the successful help-to-buy programme. Supply will likely remain relatively constrained despite rising demand, so investors can look forward to continued property price growth in markets across the country.

The big change remains the stamp duty land tax surcharge for buy-to-let investors. From April 1, 2016, a further three per cent surcharge, on top of the existing progressive rate, was introduced for the purchase of additional residential properties, such as buy-to-let properties and second homes. Those exempt include those purchasing their first property or home owners moving from one main residence to another. This three per cent levy will apply to relevant purchases that exchanged after November 25, 2015 and complete on or after April 1, 2016.

A notable amendment was the extension of this surcharge to include large-scale buyers, with those purchasing over 15 properties no longer set to be exempt. Given the importance of large-scale investors in financing new developments, some experts expect this to have a negative effect on the prospects of increasing housing supply in the UK.

Increase in demand
These key measures have the potential to actually increase demand for UK properties by giving a vast demographic of buyers access to the early rungs of the property ladder - a group that plays a key role in investors' ability to achieve strong returns at the end of their planned investment term.

Ahead of the UK's EU referendum on June 23, we see this year's budget signalling stability, reassuring investors that UK property remains a safe haven asset.

We believe a 'Brexit' is unlikely with the majority of polls signalling that the public will vote to remain in the EU, increasing support for a withdrawal. If by rare chance the UK decides to leave the EU, it could open doors to further investment into Berlin - the economic powerhouse and Germany's capital.

A city which has gathered interest over recent years and has now become one of the most popular destinations to invest abroad is Germany's Berlin. Its young population, commercial might and unique history are combining to create one of the world's most dynamic investment markets.

As the third largest city in Europe with over 3.5 million residents, Berlin has a diverse and unique set of attributes which make the city a great investment opportunity. The city has a pro-business culture with 40,000 new companies setting up shop per year, and Berlin has seen ?1.9 billion invested in local start-ups in the first half of 2015. To compliment this, the city also has a young and educated population, with 170,000 students studying across four major public universities and five recognised private universities.

Strong performance
Seen as an investment stronghold within continental Europe, even during a difficult period for the eurozone, Berlin's property market has seen a strong performance in 2015. According to CBRE, 2015 saw the average apartment building price rise by 18.5 per cent  and average rents across all market segments increase by 5.1 per cent. A citywide average price increase of 10.5 per cent was recorded in 2015, with the top market segment performing significantly better as prices rose 13.2 per cent across the year.

It's also worth remembering that Berlin remains very much a renter's city, with the owner-occupation rate still sitting at only 15 per cent, according to CBRE. This rate has been slowly rising, having been only 10 per cent when the Berlin Wall fell 25 years ago, but the trend for homeownership is certainly gaining steam. This means that investors can not only expect a strong sales market when they reach the time to divest, but also that the rental market is very strong, keeping yields over the course of the investment term stable and secure.

The UK undoubtedly remains a key property investment hub and still has an incredible amount to offer; especially with outer London, Croydon and Manchester becoming increasingly popular as investment destinations. However, year-on-year economic strength and population growth continue to push Berlin among other European cities as one of Europe's prime locations for residential property investment - an interesting alternative owed serious consideration.

- The writer is director and head of Middle East at IP Global. Views expressed are his own and do not reflect the newspaper's policy.